Please use this identifier to cite or link to this item:
Title: Interest rate liberalization and capital adequacy in models of financial crises
Authors: Karim, D
Ventouri, A
Barrell, R
Keywords: Banking crises;Capital adequacy;Interest rate deregulation;Economic freedom indexes
Issue Date: 2015
Citation: IInterest Rate Liberalization and Capital Adequacy in Models of Financial Crises, 15-22, (2015)
Abstract: We characterize the effects of interest rate liberalization on OECD banking crises, controlling for the standard macro prudential variables that prevail in the current literature. We use the Fraser Institute’s Economic Freedom of the World database. We test for the direct impacts of interest rate liberalization on crisis probabilities and their indirect effects via capital adequacy. Over the period 1980 - 2012, we find that interest rate liberalization has a crises reducing effect, and it appears that the beneficial effects work by strengthening capital buffers. We also show that when controlling for liberalization, capital adequacy and liquidity, the main driver of financial crises is property price growth. Our results invariant when we control for alternative sensitivity tests for robustness purposes.
Appears in Collections:Dept of Economics and Finance Research Papers

Files in This Item:
File Description SizeFormat 
Fulltext.pdf804.21 kBAdobe PDFView/Open

Items in BURA are protected by copyright, with all rights reserved, unless otherwise indicated.